2. A new copier company plans to produce one model of copier. The copiers will sell for $820 each. The annual fixed costs of operation are $5,600,000 and the variable cost is $210 per unit. a. Assuming that they can sell everything they produce at this price, compute the breakeven quantity QBEP. b. If the company actually produces 11,000 copiers the first year, what will the profit/loss be? c. Include a fully-labeled breakeven chart illustrating the problem.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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2. A new copier company plans to produce one model of copier. The copiers will sell for $820 each.
The annual fixed costs of operation are $5,600,000 and the variable cost is $210 per unit.
a. Assuming that they can sell everything they produce at this price, compute the breakeven
quantity QBEP.
b. If the company actually produces 11,000 copiers the first year, what will the profit/loss be?
c. Include a fully-labeled breakeven chart illustrating the problem.
3. Fixed and variable cost for three potential facility locations are as shown below.
Fixed cost
Variable cost
Location
per year
$240,000
$100,000
$150,000
per unit
$15
$30
$20
a. Plot the total cost lines for these four locations on a single cost-volume graph.
b. If expected output is to be 12,000 units per year, which location would provide the lowest cost?
c. Identify the range of output over which each location alternative would be preferred (lowest
cost). Compute the relevant crossover points, and clearly indicate your conclusion.
Transcribed Image Text:2. A new copier company plans to produce one model of copier. The copiers will sell for $820 each. The annual fixed costs of operation are $5,600,000 and the variable cost is $210 per unit. a. Assuming that they can sell everything they produce at this price, compute the breakeven quantity QBEP. b. If the company actually produces 11,000 copiers the first year, what will the profit/loss be? c. Include a fully-labeled breakeven chart illustrating the problem. 3. Fixed and variable cost for three potential facility locations are as shown below. Fixed cost Variable cost Location per year $240,000 $100,000 $150,000 per unit $15 $30 $20 a. Plot the total cost lines for these four locations on a single cost-volume graph. b. If expected output is to be 12,000 units per year, which location would provide the lowest cost? c. Identify the range of output over which each location alternative would be preferred (lowest cost). Compute the relevant crossover points, and clearly indicate your conclusion.
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